CONTRACTOR

BUSINESS
STRUCTURES
HEADACHE
PROFIT
LEGAL LIABILITY
TAX
BUSINESS
STRUCTURES
CONTRACTOR
 CONTRACTOR BUSINESS STRUCTURES

➢ THE SOLE PROPRIETOR OWNS ALL THE ASSETS AND

PROFITS BROUGHT IN BY THE BUSINESS, AND THE
SOLE PROPRIETOR ALSO "OWNS" ALL THE DEBT AND
LIABILITY.
➢ FOR TAX AND LEGAL PURPOSES, THE BUSINESS AND
THE INDIVIDUAL WHO IS SOLE PROPRIETOR ARE
CONSIDERED THE SAME ENTITY.
➢ IF YOU RUN A CONTRACTOR BUSINESS THAT
INVOLVES RISKY WORK, YOUR CHANCES OF
GETTING SUED MIGHT BE HIGH. SO A SOLE
PROPRIETORSHIP MIGHT NOT BE
THE WAY TO GO.
CONTRACTOR BUSINESS STRUCTURES

➢EASY SETUP AND LOW COST

➢NO CORPORATE BUSINESS TAXES
➢NO ANNUAL REPORTS/FILINGS
➢NOT RESTRICTED BY FORMAL
BUSINESS STRUCTURE
➢EASY RECORDKEEPING
 CONTRACTOR BUSINESS STRUCTURES

➢UNLIMITED LIABILITY
➢NO ONGOING BUSINESS LIFE
➢DIFFICULT TO RAISE MONEY
➢INABILITY TO TAKE ON BUSINESS
DEBT
➢CAN BE SEEN AS UNPROFESSIONAL
CONTRACTOR BUSINESS STRUCTURES
 CONTRACTOR BUSINESS STRUCTURES

➢ A PARTNERSHIP IS THE RELATIONSHIP BETWEEN TWO OR

MORE PEOPLE TO DO TRADE OR BUSINESS. EACH PERSON
CONTRIBUTES MONEY, PROPERTY, LABOR OR SKILL, AND
SHARES IN THE PROFITS AND LOSSES OF THE BUSINESS.
➢ A BUSINESS SHARED BY MULTIPLE OWNERS. IT'S NOT A LEGAL
BUSINESS ENTITY, AND IT DOESN'T HAVE TO BE REGISTERED
WITH THE STATE. BASICALLY, IF YOU DECIDE TO GO INTO
BUSINESS WITH ANOTHER PERSON WITHOUT FILING ANY
STATE PAPERWORK, YOU'RE AUTOMATICALLY IN A
PARTNERSHIP.
CONTRACTOR BUSINESS STRUCTURES

➢STRONGER FINANCIAL POSITION

➢BRAIN TRUST.
➢A BROADER NETWORK.
➢FRESH EYES
➢TAX SAVINGS
CONTRACTOR BUSINESS STRUCTURES

➢ SELECT A PARTNERSHIP STRUCTURE

➢ CHOOSE PARTNERS AND THEIR ROLES
➢ NAME YOUR BUSINESS
➢ REGISTER YOUR PARTNERSHIP
➢ OBTAIN A BUSINESS IDENTIFICATION
NUMBER
➢ CREATE A PARTNERSHIP AGREEMENT
➢ SECURE NECESSARY LICENSES AND
PERMITS
 CONTRACTOR BUSINESS STRUCTURES

A business partnership agreement is a written

contract between partners that specifies their
obligations and contributions to the business, as
well as other conditions of their relationship. Every
business partnership agreement form should detail
these clauses:
➢ Who makes decisions
➢ Percentage of ownership
➢ Profits and losses
➢ Exit strategies
 CONTRACTOR BUSINESS STRUCTURES

GENERAL PARTNER:
➢ Personally liable
➢ Manages the company
➢ Represents the limited partnership externally
LIMITED PARTNER:
➢ Reduced liability (up to the amount of their
initial investment)
➢ No management role
 CONTRACTOR BUSINESS STRUCTURES

A corporation is legally a separate and distinct entity from

its owners. Corporations possess many of the same legal
rights and responsibilities as individuals.

A corporation may be created by

an individual or a group of people
with a shared goal. That does
not always involve making
a profit.
 CONTRACTOR BUSINESS STRUCTURES

Following are the major distinguishing characteristics of a

corporation:
1. Ownership
2. Board of Directors
3. Perpetual Existence
4. Limited Liability
5. Corporate Taxes
6. Distinct Legal Entity
CONTRACTOR BUSINESS STRUCTURES

➢ Limited Liability
➢ Skilled Management Team
➢ Greater Capital Base
➢ Transfer of Ownership
➢ Stability
➢ Legal-Entity Status
CONTRACTOR BUSINESS STRUCTURES

➢ Difficulty and Expense of Starting

➢ Initial Cost
➢ Multiple Taxation
➢ Lack of Control
➢ Possible Conflict with the Board of Directors
➢ Difficulty of Termination
➢ Lack of Personal Interest
➢ Credit Limitations
➢ Lack of Secrecy
CONTRACTOR BUSINESS STRUCTURES

➢ For-profit entity
➢ Not-for-profit entity
CONTRACTOR BUSINESS STRUCTURES

Four main types of corporations are

designated as:
➢ C corporations
➢ S corporations
➢ Limited Liability Companies (LLCs)
➢ Nonprofit Organizations
 CONTRACTOR BUSINESS STRUCTURES

Incorporation is the process that is to be followed

legally to set up company corporations. It is short
formed as Inc. It relates only to the legal areas of
a particular corporation to be formed shortly.
Incorporation is the technical status of a
corporation.
 CONTRACTOR BUSINESS STRUCTURES

Advantages:
➢ Separate legal entity
➢ Unlimited life
➢ Limited liability
➢ Easy transfer of ownership shares
➢ Competent management
➢ Source of capital
 CONTRACTOR BUSINESS STRUCTURES

Disadvantages:
➢ Incorporation costs
➢ Double taxation
➢ Documentation
CONTRACTOR BUSINESS STRUCTURES

MAKATI DEVELOPMENT CORPORATION

Makati Development Corporation is considered the largest construction
company in the Philippines in terms of gross revenue and net income
according to the 2016 data. As stated in its website, MDC has been in the
industry for 45 years and has more than 400 projects nationwide some of
which are the Ayala Malls Manila Bay, Ayala Malls Vermosa, and High
Street South Corporate Plaza. It has four subsidiaries, MDC Build Plus, Inc,
MDC Concrete Inc., MDC Equipment Solutions, Inc., and MDBI
Construction Corporation.
CONTRACTOR BUSINESS STRUCTURES

MEGAWIDE CONSTRUCTION CORPORATION

Based on Quezon City, Megawide Construction Corporation, or simply
Megawide, is a 23-year-old construction company with portfolio in airport
infrastructure and engineering, procurement, and construction, with solar
projects as well. Their key projects are the Mactan-Cebu International Airport,
Clark International Airport, Paranaque Integrated Terminal Exchange,
DoubleDragon Plaza, Urban Deca Tower EDSA, and a 25-MW solar farm in
Silay in the Negros Island. It has its own precast plant using advanced
facilities.
CONTRACTOR BUSINESS STRUCTURES

SANTA CLARA INTERNATIONAL CORPORATION

Sta. Clara International Corporation has been involved in the construction
industry since 1976, established as a single proprietorship. Eventually it grew
to become one of the construction leaders in the Philippines, serving power
and utilities, infrastructure and civil engineering sectors. Few of its highlight
projects are the NAIA Terminal 3, the 60-Megawatt solar farm in Toledo, Cebu,
the Subic-Clark-Tarlac Expressway, the Pagbilao Power Station, and the
20MLD Quezon City Concrete Reservoir.
 CONTRACTOR BUSINESS STRUCTURES

MONOLITH CONSTRUCTION AND

DEVELOPMENT CORPORATION
With more than 200 projects under its name since 1987,
Monolith Construction & Development Corporation is a
preferred construction company in the Philippines as
well. It started with projects ranging from warehouse to
residential buildings in Metro Manila, and started
expanding its portfolio to high-rise condominiums and
offices, commercial towers, convention center, and
shopping malls, among others. The Aseana Three BPO,
the Jollibee Tower, the SM Seaside City, the Bank of
Makati, the Mayflower BPO Building, and the World
Commerce Place are all projects by Monolith.
 CONTRACTOR BUSINESS STRUCTURES

EEI CORPORATION
EEI Corporation is recognized as one of
the leading construction companies in the
Philippines, known for the quality of its
work and the excellence of its workforce.
It has the broadest range of construction
and engineering services, with expertise
in the construction of large-scale heavy
and light industrial projects, infrastructure,
and property development projects all
over the world.
 CONTRACTOR BUSINESS STRUCTURES

SANTA ELENA CONSTRUCTION AND

DEVELOPMENT CORPORATION
Sta. Elena Construction & Development Corporation was
founded in 1995 through the unwavering commitment of the
business savvy President and CEO, Alice Eduardo. Today,
the company is considered as one of the leading
construction firms in Foundation Works, specializing in Pre-
stress Piling, Bored Piling, Static Piling and Concrete/Metal
Sheet Piling, as well as the construction of Ports, Harbors,
Marine/Offshore Engineering and Infrastructures such as
Bridges, Highways, Horizontal structures and the building of
Industrial Plants and Power Plants.
 CONTRACTOR BUSINESS STRUCTURES

A limited liability company, commonly referred to

as an “LLC”, is a type of business structure
commonly used in the United States. LLCs can be
seen as a hybrid structure that combines features
of both a corporation and a partnership. Like a
corporation, LLCs provide their owners with
limited liability in the event the business fails. But
like a partnership, LLCs “pass-through” their
profits so that they are taxed as part of the
owners’ personal income.
CONTRACTOR BUSINESS STRUCTURES

PARTNERSHIP VS LLC VS CORPORATION

FORMAL
PARTNERSHIP
ARRANGEMENT

NOT A LEGAL PASS-

THROUGH SEPARATE DOUBLE
BUSINESS
PROFITS/TAX ENTITY TAXATION
ENTITY
MEMBER/OWNER
EXIST IN
ARE PERSONALLY
TRANSFERABILITY PERPETUITY
RESTRICTION
LIABLE
 CONTRACTOR BUSINESS STRUCTURES

PASS-THROUGH PROFITS AND TAXATION:

➢ Both LLCs and partnerships are allowed to pass
through their profits, along with the responsibility for
paying the taxes on them, to their owners

➢ Their losses can be used to offset other income

but only up to the amount invested.
 CONTRACTOR BUSINESS STRUCTURES

SEPARATE ENTITY
➢ LLC separates the business assets of the company
from the personal assets of the owners, insulating
the owners from the LLC's debts and liabilities.
 CONTRACTOR BUSINESS STRUCTURES

FORMAL PARTNERSHIP AGREEMENT

➢ An LLC is a formal partnership arrangement that requires
articles of organization to be filed with the state. An LLC is
easier to set up than a corporation and provides more
flexibility and protection for its investors.
➢ Articles of organization can then be documented and filed
with the state. These articles establish the rights, powers,
duties, liabilities, and other obligations of each member of
the LLC. Other information included on the documents
includes the names and addresses of the LLC's members,
the name of the LLC's registered agent, and the business'
statement of purpose.
 CONTRACTOR BUSINESS STRUCTURES

FORMAL PARTNERSHIP AGREEMENT

➢ The articles of organization are filed, along with a fee paid
directly to the state. Paperwork and additional fees must
also be submitted at the federal level to obtain an
employer identification number (EIN).
 CONTRACTOR BUSINESS STRUCTURES

TRANSFERABILITY RESTRICTION
➢ Owners of LLCs must meet the "transferability
restriction test," which means the ownership interests
in the LLC are not transferable without restriction. This
restriction makes the LLC structure unworkable for
major corporations. For corporations to attract large
sums of capital, their corporate stock must be easily
transferable in the stock exchanges. However, this
restriction isn't as problematic for smaller companies,
where stock ownership transfers take place relatively
infrequently.
 CONTRACTOR BUSINESS STRUCTURES

TRANSFERABILITY RESTRICTION
➢ Depending on state law, an LLC may have to be
dissolved upon the death or bankruptcy of a member.
A corporation can exist in perpetuity.
➢ In an LLC, a business continuation agreement can be
used to ensure the smooth transfer of interests when
one of the owners leaves or dies. Without such an
agreement in place, the remaining partners must
dissolve the LLC and create a new one.
 CONTRACTOR BUSINESS STRUCTURES

➢Separate business entity thus

protects its members from debts
and legal liabilities
➢Pass-through profits and tax,
avoiding double taxation
 CONTRACTOR BUSINESS STRUCTURES

➢Ownership interests in the LLC are

not transferable without restriction.
➢Cannot exist in perpetuity
 CONTRACTOR BUSINESS STRUCTURES

Although the Philippines does not adopt the legal concept of

Limited Liability Company (LLC) or Private Limited Company
(PLC), a DOMESTIC CORPORATION serves as its closest local
equivalent by virtue of the powers and attributes granted to the
latter by the Corporation Code of the Philippines. Similar to LLCs,
a domestic corporation incurs its own liabilities
and is legally responsible for the payment of its
obligations. Its stockholders can also only
be held liable to the extent of their share
capital.
 CONTRACTOR BUSINESS STRUCTURES

The juridical personality of a domestic corporation could only

come into existence after the issuance of the Certificate of
Registration (upon filing of the Articles of Incorporation and
other relevant documents) by the Securities and Exchange
Commission (SEC) – the government agency mandated to
supervise the existence and government compliance of
corporations operating in the Philippines.
 CONTRACTOR BUSINESS STRUCTURES

Domestic corporations must satisfy the statutory requirement of at

least five (5) and not more than fifteen (15) incorporators who shall
be mentioned in the Articles of Incorporation as originally forming
and composing the corporation. They must be signatories to the
Articles and have no powers beyond those vested in them by the
statute. Moreover, they must be natural persons of legal
age, each subscribe to or own at least one (1) share
of the capital stock of the corporation, and
majority of them have to be residents
of the Philippines.
 CONTRACTOR BUSINESS STRUCTURES

Provided under the provisions of the Foreign Investments Act of

1991, domestic corporations can be classified as any of the
following:

➢ Domestic Corporation with 0% Foreign Equity (100% Filipino-

owned)
➢ Domestic Corporation with 0.01% to 40% Foreign Equity
➢ Foreign-Owned Domestic Corporation with 40.01% to 100%
Foreign Equity
 CONTRACTOR BUSINESS STRUCTURES

The classification of domestic corporations in the

Philippines depends on their stockholders’ outstanding
amount of shares to the capital stock of the corporation.
Moreover, the nationality of the stockholders determines
the corporation’s extent of participation in areas of
business activity and investment in the Philippines.
 CONTRACTOR BUSINESS STRUCTURES

Domestic corporations that only consist of Filipino stockholders can freely

participate in any economic activity and industry sector in the country.
Conversely, those that consist of foreign stockholders are restricted to
participate in activities that are included in the Foreign Investment Negative
List (FINL). Although foreign investors and companies are generally allowed
to set up businesses in the Philippines, the Constitution and some specific
laws prescribe the implementation of the FINL to restrict foreign equity and
participation in activities that are wholly or partly exclusive to Filipino
entrepreneurs. However, economic activities not included in the FINL are
100% open to foreign investment and participation.
CONTRACTOR BUSINESS STRUCTURES